Thursday, 7 September 2017

Economic facts have become SNP's enemy

The reaction of the SNP and their pro-independence outriders
to the latest Government Expenditure and Revenue Scotland (GERS) figures has laid
bare the astonishing paucity of their economic arguments.

Unable to answer the obvious problems that the GERS figures highlight
for those championing the break-up of the UK, they’ve resorted to trying to
discredit their own figures. In case anybody’s forgotten: these are the figures
on which they based their case for Independence, figures their own White Paper
described as “a useful indication of the
relative strength of Scotland’s public finances as part of the UK and a
starting point for discussions of Scotland’s fiscal position following
independence”.

Now it seems the SNP want to deny this starting point.

Having once proudly boasted that they had Nobel Laureates
championing their cause, the SNP now appear reduced to relying on the
increasingly embarrassing contributions of accountant and tax specialist Professor
Richard Murphy.

We should be more interested in what Murphy says than who he
is, but given his penchant for self-aggrandisement it’s worth noting that he’s the
man who was unceremoniously dumped as an advisor to Jeremy Corbyn’s Labour
Party. John McDonnell publicly stated that Murphy “leaves a lot to be desired on macroeconomic policy”, to which he responded by suggesting that the Shadow Chancellor – a self-confessed fan of
Karl Marx’s Das Kapital - was “all too
willing to accept conventional neoliberal thinking”. Let’s be kind and just
say that nobody can accuse Murphy of being guilty of conventional thinking.

Politically homeless, Murphy seems to have cast his eyes
north and spotted a pro-independence movement bereft of ideas and desperate to
find ways to distract from the simple facts shown in GERS.

GERS shows that the UK’s deficit is running at just 2.4% of
GDP and, because Scotland voted No in 2014, that relatively healthy fiscal
context determines Scotland’s ability to continue to sustain spending on vital
public services.

By contrast, following the collapse in North Sea oil revenues,
Scotland’s notional stand-alone deficit is 8.3%. The EU’s “excessive deficit”
threshold is 3.0%, so even before considering the challenges of creating a
currency and weathering the shock of separation from the UK single-market – a
market objectively four times more important to Scotland than the EU - it’s
clear that an independent Scotland wouldn’t be able to sustain the tax and
spend levels described in GERS.

So economic facts have become the SNP’s enemy. Cue Professor
Murphy, a man willing to say what desperate people want to hear if it gets him
in the limelight. With the gay abandon of somebody unburdened by understanding,
he’s set about casting aspersions on the Scottish Government Statisticians who
compile the GERS figures and all those who use them.

He’s bumptiously asserted that the figures are
“untrustworthy”, “rigged by Westminster”, “literally made up” and “nonsense”. Incredibly
he’s even suggested that those using the GERS methodology are “risking the
allegation of professional misconduct”. So that includes not only the Scottish
Government’s Chief Economic Adviser’s team in St Andrews House and the ONS (who
qualify the report as National Statistics), but presumably also those Nobel Laureats
who relied on GERS when they sat on the SNP’s Fiscal Commission Working Group.
Surely only the most desperate politician would lean on Professor Murphy’s
transparently misguided proclamations for support?

Well it turns out there are quite a few desperate
nationalist politicians. SNP MP Mhairi Black used a recent newspaper column to
cite Professor Murphy as reason to dismiss her own government’s figures. A
quick search of Twitter shows his blog rants have been promoted by SNP MSPs and
MP’s including Joan McAlpine, Peter Grant, Chris Law, Gordon MacDonald,
Christina McElvie and Richard Lyle1 .

If any of these politicians had bothered to dig past
Murphy’s bluster, they’d see that his ill-informed opinions are based on a
combination of technical misunderstandings, an inability to grasp the simple
concept of materiality and his own failure to get his head around the figures.

There isn’t room here to indulge in the minutiae of Murphy’s
technical points2.

Suffice to say he’s like somebody looking at a report into
the Titanic disaster and complaining there isn’t enough information about the
deck-chairs. We might not know precisely how the deck-chairs were arranged, but
that’s just not a material issue.

Murphy’s wider argument is basically one of incredulity: he
simply refuses to believe the GERS figures can be correct because he doesn’t
understand them. He casually advertises his ignorance of how the figures are
compiled by admitting to being “continually bemused” because he thinks the
numbers are somehow “improbable”.

For those who’ve taken the time to study the GERS figures
and the methodology behind them, there’s nothing bemusing or improbable about
what they show. Scotland’s per capita deficit is much larger than the rest of
the UK’s mainly because of higher spending.

Despite GERS-deniers’ determined attempts to obfuscate and
misdirect, Scotland’s higher per capita spending has nothing to do with
estimates or allocations. Nobody credibly disputes that we spend over £1,500 per
person more on comparable public services in Scotland, a fact fully explained
by the known actual figures in the table on this page3.

There isn’t necessarily anything inherently unfair about
this either. Scotland has geographic, demographic and socio-economic
characteristics which mean greater per capita spend is required to deliver
equivalent services.

Whatever the likes of Murphy may claim, there’s nothing
bemusing or improbable about the relative scale of Scotland’s deficit.

The pro-independence camp likes to suggest that the GERS
figures show Scotland failing under the yoke of Westminster rule. In fact they
show UK-wide sharing of resources allowing greater spending on public services
in areas with greater economic need; only the most narrow-minded nationalist
could see that as a failure.

18 comments:

Unfortunately, this will have no effect on Murphy and his acolytes who have more respect for opinions - their own, of course - than facts and logic. This was why he was co-opted into the Labour executive, where he asserted that a Labour government need not worry about finances as they could just "create money out of thin air". Someone mentioned "Weimar Republic" and "Zimbabwe" and even McDonnellgrew tired of Murphy's arrogance.

So, given the fact that Murphy's opinions will carry the day, expect the next attack to rely on the Magic Money Tree.

Spud's latest response is hilarious both for its attention to moving the deckchairs and for its insistence that he is neutral in the debate. He doesn't realise that there is no debate and that he is clearly in the wrong or even deluded

Plainly, a party unwilling to accept their own inconvenient facts isn't fit to lead Scotland into independence. If GERS was substantially flawed, it would make a nonsense of their own independence White Paper from 2014. It was also mean that the Scottish deficit could be even worse than it is, since we would now have no basis to believe anything about the deficit. These are the implications of GERS denialism.

Our failure to tackle poverty, addiction (to alcohol, drugs, sugar, processed food, smoking and violence) which reduces our economic output, tax revenues and burdens public services by around £8-9 billion pounds every year, according to the Scottish Government statistics.

Those are some of the key reasons why we need much higher public spending than elsewhere in the UK. Drug-related deaths are the highest in Europe and the prisoner population is also amongst the highest in Europe (costing £30,000 per person per annum for existing prisoners and up to £70,000 for new ones by the time they are dealt with by the police & courts). Our life expectancy is lower than other UK nations.

We've had 20 years since we voted yes to devolution and all of those that have held ministerial office (Labour & the SNP and to a lesser extent the Lib Dems) have failed to make a serious dent in these issues.

Only the Scottish Tories can genuinely be absolved of blame. But they are so policy-light at the moment, time is running out to put forward a credible, costed alternative much before 2021. They seem incapable of finishing a sentence without waffling on about 'no to a second referendum' knowing full well their own party in London will never agree to another referendum anyway.

Both the smoking ban and same-sex marriage were brought in at Westminster level. So apart from free personal care for the elderly, perhaps the time is right to ask, what is the point of Holyrood, if all we are going to be served up is a timid version of what comes out of Westminster?

The indy campaign of 2014 now hangs round the necks of the SNP like an anvil. It is quite revealing that the objection to GERS authenticity is so muted among the leadership of the SNP, and is instead left to the Mhairi Black. There is a lot to like about Ms Black, parliament should have space for such a young, refreshing, passionate individual who really tries to argue from first principles against the stuffy structures of established power. IMO she is being used by the SNP to give a veneer of radicalism, a radicalism absent from their programme in government for the last decade. The voters will forgive Mhairi for her limitations in macro economic debates....but it will not be enough to save those across urban scotland who merely stonewall the facts, or the Swinney's and wisharts's of this world who say nothing and point to a flag. The tory mishandling of Brexit is now the only hope for the indy campaign, the snp have seriously shot their bolt.

3 days and no one has corrected Drew's errors regarding smoking ban & same sex marriage being introduced by Westminster. Both are devolved and Scotland introduced the smoking ban before Westminster and same sex marriage after Westminster.As for the rest of your post the root causes of all the other problems you list are so complex that it is difficult to pin the blame either on Westminster or Holyrood. That doesn't stop the most ardent advocates of their preferred system pinning all the blame on the other lot.As to "what is the point of Holyrood?", the recent poll in the Sunday Times seems to indicate that most of us are reasonably satisfied with its performance. On top of free personal care you can add, abolition of the right to buy, land reform (albeit limited), free Uni education, free prescriptions, no bedroom tax, free eye tests and no doubt lots of stuff i have forgotten about. Some will no doubt question whether all of these are good things but they are things we have which we wouldn't have without devolution.

Apologies, what I was trying to say was that the smoking ban & same sex marriage were introduced by Westminster anyway, so my point is they are not distinct 'Scottish only' ideas. Had Holyrood not existed we would still benefit from them because Westminster introduced them at a UK level.

The general argument is that Holyrood was supposed to be different or more radical than Westminster. That's not to say it hasn't introduced some good legislation and policies but many of the policies you list benefit largely middle class voters (people on lower incomes didn't have to pay Uni fees or for prescriptions). I want to see poverty and inequality tackled.

The policies & legislation over land reform are encouraging but over a period of 20 years progress is slow.

The biggest, most radical achievement of devolution accross the UK has been the peace process in Northern Ireland (despite the current stalement around Stormont).

Critics of the SNP can't blame constitutional wrangling for a lack of progress because devolution hasn't help improve things drastically in Wales either, in terms of poverty or the economy.

Part of the problem is that Unionists were so terrified that devolution could give the SNP a platform (which it did anyway), prior to the Calmen Commission and the Smith Commission the tax powers were pretty limited.

I say the man's an idiot - to suggest the taxes we currently raise and the money we currently spend are *meaningless* as a starting point from which to discuss what an independent Scotland's finances might look like is self-evidently moronic

I've no interest in what he says - but he's right that one of my businesses which employs 80 people in Scotland does (among other things) sell pet food - if the best he's got is ad hominem attacks based on his inability to read a set of accounts ... well says it all really

I would like to personally congratulate you as your blog chokka has been selected by our panelist as one of the Top 100 Scotland Blogs on the web.

http://blog.feedspot.com/scotland_blogs/

I personally give you a high-five and want to thank you for your contribution to this world. This is the most comprehensive list of Top 100 Scotland Blogs on the internet and I’m honored to have you as part of this!

The first is Moody's downgrade of the UK economy to Aa2. The Financial times notes, in passing, that the Scottish Government deficit is more than three times the UK deficit as a whole. I cannot access the article, but I assume this is in percentage terms. As you personally well know, the Scottish Government deficit is eye-watering, and only made possible by huge transfers from rUK. Independence, and an independent currency, would result in a blistering currency attack, and a credit rating of Aa2 would be something that only dreamers would suggest is possible. Which planet are Sturgeon and Salmond on? Answer: the same one as Theresa May, Boris Johnson, etc.

The second is Sturgeon's attitude to Catalonian independence. Apparently, it's OK because it represents self-determination for a people yearning to be free. But I am sure the Orkneys and Shetlands yearn to be free of Mrs Sturgeon. By extension, my family is a "people" yearning to be free. So where does this nonsense end? The complete atomisation of the nation state on the spurious grounds that it contains individuals who yearn to be free? Perhaps you could draw out from the SNP how a group north of Berwick, that is ethnically near identical to those south of Berwick, and who speak the same language, could possibly be said to be a "people" requiring independence. The only difference I have heard reliably reported is that the Scots still occasionally paint themselves with woad.

GERS is merely a reference point for an independent Scotland. It's not rocket science to note that figures relating to Scotland within the framework of the UK will serve only as a reference for considering a)what has historically been spent and b)the budgetary changes that would lie ahead in the event of secession.

The Unionist argument's economic weakness lies in a gospel-like reliance upon the historical data being an absolute figure or within a very small percentage fluctuation. It is a "starting point" as pointed out by the SNP White Paper. That recognition that it is a "starting point" is what is glibly stepped over by too many commentators at their peril.

A share of UK deficit would of course be honoured in an agreed Fiscal Transfer even though the borrowing is, to all intents and purposes, a UK debt given that Scottish Govt borrowing is not devolved. It's a UK debt that the Treasury have stated the UK would honour regardless of agreements on Fiscal Transfer. There is no one (absolutely no one) can safely predict what that figure would be. The negotiations for a separation of the union would take up to two years during which time deals will be proffered and countered back and forward in lengthy negotiations between two bodies with much to gain from it being an amicable settlement.

Consider that no one knows who would be the UK prime minister. Which party would be the party in power at Westminster, coalition perhaps? What currency arrangements would have been made and what is the exchange rate status of currencies at the time of negotiations? Brexit status? EU membership status or deal? International trade deals in progress? Foriegn Investments into either country could be shaded by secession dealings. It's a fiscal maze.

Those who think they know the outcomes without being aware of all these considerations could be made to look very silly in retrospect. Look at the Brexit negotiations. A shambles still awaiting the emergence of genuine joined-up coherent adult progress. Six months ago they said EU "can whistle" for their £40bn and here we are having all but agreed that it will be paid and will in fact be in excess of £50bn. The great economic commentators and seers are now wise to the folly of commitment to anything other that broadbrush suppositions and guesswork. The same will apply to the Scotland deal.

We live in interesting times as we watch political careers tumble because of their previous certainty.